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Rising yields are not a barrier to risk trading today

Treasury yields are at the day’s high, but that’s not a hurdle for US equities. The S&P 500 is almost back to the same level after falling more than 40 points a few hours ago.

In FX, the dollar remains strong but is giving way a bit over the past hour. AUD/USD rallied to 0.7213 from a low of 0.7199. This will likely help prevent the three candle reversal highlighted earlier from closing below the key 0.72000 level.

I don’t put a lot of fundamental foundation behind the movements in anything today. Retail sales have been dismal and the UMich survey is a poor economic indicator. Meanwhile, oil apparently can’t be stopped and that’s one of the reasons to sell bonds.

Jamie Dimon caught the eye for saying he thinks the Fed could hike 6 or 7 times this year, but I don’t know if anyone is re-pricing his trades based on his predictions.

Ultimately, I think you have to go where obligations take you. Zooming out, the recent decline in 10-year yields is barely a dot on the radar and increasingly likely to be a true breakout of 1.77% and on its way to 2%.

How do you want to be positioned when this happens? Normally it’s a boost for USD/JPY, but it could have a significant impact on risky assets, especially the Nasdaq, so I’m not sure if that’s the case.

I’m open to ideas here, but the single trade might be the right one: short-term bonds.


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